Financial planning is often dismissed by young adults despite the fact that they’re the ones who desperately need it. The reasoning for this is usually a simple “I don’t know how.” But here’s a secret: it’s easier than you think to obtain a more comfortable and financially stable lifestyle! 

1. Learn how to budget.  

Always know where your money is going. There are far too many people, including myself at times, that are surprised to see their account balance and have no idea what they’ve blown their money on. Break this habit and create a budget plan for yourself so that you don’t overspend. In that plan, make sure to include living expenses as well as savings and any debt you owe. If you’re unsure of how to divide it up, use the 70 (living expenses) – 20 (savings/investments) – 10 (debt) rule as a guide and adjust accordingly.

2. Start saving early.

Establish financial goals and objectives, create a long-term plan that will allow you to reach those goals, and start saving as soon as possible. Seriously, do not procrastinate with this. You will not miss that money now as much as you will need it later. When you’re first starting your career, it may be harder to save due to a lower salary and/or student debt, but saving even a few dollars from each paycheck is still worth the effort. Compound interest can stretch even a little bit of money a long way. To see the effect of compound interest, take this example from University of Louisville professor, Dr. Jay Brandi:

Consider, for example, the implications of investing $1,000 at age 25 and leaving the money invested at 8% for 40 years until reaching the age of 65. Earning 8% annually for 40 years puts our money to work earning money and, as shown below, the one-time $1,000 investment grows to $21,724.52 by age 65. 

Who wouldn’t give up a small amount of cash for that kind of return?

3. Invest in a 401(k). 

Contributing to your retirement/401(k) is crucial and as I noted previously, it’s best to start early. Believe it or not, you are going to get old one day and having a large retirement fund will make your life a thousand times easier. When you start your career, make sure you take full advantage of employer contributions. If you’re lucky, your employer will match your investment! That means you increase your retirement fund for free. And again, with all of that compound interest, your investment is guaranteed to be more than worthwhile. 

4. Have an emergency fund.

From cars breaking down to job layoffs, life happens. Unfortunately, there’s not really a way to predict and prevent these events from occurring, so the best option is to just be prepared. Having an emergency fund keeps you from having to take on more debt in the case of unexpected expenses and will save you a lot of stress in the process.

5. Build credit.

The key here is to do so without racking up a lot of debt. Having a credit card or two is okay, but don’t overdo it and try to pay them off in full to avoid interest. And make sure you always make your payments on time, as this is the easiest way to build credit. Do not charge more than you can afford to pay back. You will lose money as the interest accumulates and worse, you may end up lowering your credit score instead of raising it! 

6. Invest wisely. 

Let me reiterate that smart investing can lead to some pretty hefty returns. Investing in your education and expanding your skill set are also extremely beneficial. But beyond that, it’s important to do your research and be aware of risks when investing in things like stocks and shares. Just keep in mind that the greater the potential gain, the greater the risk of losing. Bonds and other fixed-income securities are a safer bet if you’re not keen on taking risks. If you are unsure of how to invest your money, you can always consult a financial planner!

7. Reward yourself occasionally.

You deserve to be rewarded for all of your hard work sometimes! But save up for something big that you really want instead of constantly splurging on unnecessary items that you’ll forget about or regret buying in a few months. Buy something that will be worth your investment, like a new camera if you’re into photography. If you decide to treat yourself to smaller things, make sure to take advantage of discounts, coupons, etc. And remember that some rewards are free!